HTC hints at life beyond smartphones; Chairwoman Takes More Active Management Role

October 20, 2013 10:39 pm

HTC hints at life beyond smartphones

By Tim Bradshaw in San Francisco and Sarah Mishkin in Taipei

Five years ago, HTC acquired One & Co, a San Francisco industrial design agency, as it began its drive to grow from mid-ranking smartphone maker to fully fledged consumer brand. It is a journey that almost succeeded, with Hollywood stars in its ads and a flagship device adored by gadget reviewers. But in a smartphone market dominated by Appleand Samsung, consumers are still treating HTC like a second-class citizen.On a bright October afternoon, in a One & Co office filled with brightly coloured prototypes of handset casings and young designers with immaculately dishevelled hair, Peter Chou and Cher Wang, HTC’s chief executive and chairman respectively, explain a subtle but significant shift in power at the top of the Taiwanese company.

“We are diehard about design,” Mr Chou says.

In a rare joint interview after a bruising few months for the Taiwanese smartphone maker, the pair sit at opposite sides of a conference-room table and explain how Mr Chou will focus on products and “innovation”, while Ms Wang will handle the less glamorous parts of fixing the company that she co-founded: sales, marketing, logistics and customer service.

“It’s a very exciting time right now because there are so many challenges – it is keeping us on tiptoes for the vision,” Ms Wang says.

Some analysts say that is putting it lightly. While its flagship HTC One has received favourable reviews, evenRobert “Iron Man” Downey Jr TV commercials have been unable to stem the decline in HTC’s smartphone market share to what Gartner estimates at 2.6 per cent.

The record for companies operating in the space between Apple and Samsung, and the morass of cheap handset makers that are absorbing the Chinese market, does not bode well for HTC.Nokia was acquired on the cheap by Microsoft after its Lumia phones failed to win over consumers while a shrunken BlackBerry is also in talks with a variety of partners after its latest devices struggled to sell.

Chinese market targeted

As Taipei-based HTC looks to rebuild, the nearby market of China is one obvious and promising hope.

To rev up its business there, the company recently appointed a new regional director covering China, and he is optimistic that better marketing and a broader range of products can help the group find success.

“We entered the Chinese market quite late, and China is big,” said Jack Tong, HTC’s head of China and president of North Asia.

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Mr Chou insists HTC’s problems are different because its flagship device, the HTC One, is doing well. “The market share loss is mostly coming from the mid- and entry-level segment,” he says. With his renewed focus on products, he plans to revamp HTC’s midrange portfolio.

That may involve further partnerships with the likes ofGoogle and Facebook. Mr Chou would not comment on the FT’s report last week that HTC is in talks with Amazon about producing a smartphone for the e-commerce group, saying only: “We are open minded to those kinds of opportunities always but we can’t specifically talk about any particular one.”

In spite of its acquisition of Nokia, Microsoft is keen for HTC to keep producing Windows Phone devices. But HTC’s sales of Windows devices have been “pretty small”, Mr Chou says. “First we have to figure out how we do the business side, and how we position a Windows Phone product in the market.”

Mr Chou and Ms Wang seemed far more animated by ideas for new devices beyond simply smartphones, hinting that HTC has both a new tablet computer and a wearable device, which might compete with Samsung’s Galaxy Gear smart watch, in development.

Wearable technology is “a critical segment for us”, Mr Chou says. “It matches what we do today as a mobile experience overall. That is one area we are excited about.”

Mr Chou says that HTC worked on a smart watch with Microsoft several years ago, but is vague on when it might try again. “It’s still too early,” he says of the wearable-technology market, with many “version one”, “gimmick” experiences that lack style. “It has to meet a need, otherwise if it’s just a gimmick or concept, it’s not for people’s day-to-day lives. That is an opportunity for us,” he says. “People laughed at us when we came out with the first smartphone . . . Now everyone has a smartphone. I’m pretty sure wearables will be the same, but don’t judge from what is in the market [now].”

While Apple – which is also believed to be developing its own “iWatch” – is poised to reveal its latest range of iPads this week, HTC remains largely absent from the tablet market.

“When the [HTC] tablet comes out it will be something nice and disruptive,” Ms Wang says. “There are a lot of devices to innovate . . . Ubiquitous intelligence is not just wearables.”

For now, HTC has more immediate problems to tackle than the “smart world” Ms Wang aspires to build.

Mr Chou’s self-professed perfectionism when it comes to product details, such as the HTC One’s seamless aluminium casing and its unusual “Ultrapixel” camera, comes at a cost.

Production issues and difficulty sourcing sufficient components from suppliers delayed its flagship smartphone’s launch this spring by a few crucial weeks so that by the time it did go on sale, Samsung’s huge marketing campaign had swung into action to promote its rival, the Galaxy S4.

“Samsung do this blitzkrieg marketing,” says Ben Wood, mobile analyst with CCS Insight. “Poor little HTC lost their window of opportunity.”

While he describes Mr Chou as a “street fighter”, Mr Wood says that Ms Wang can “keep the guys chasing rainbows in check”.

Some analysts and current and former employees say the group could look to do more contract design work for companies such as Amazon, relying on their support for marketing and sales. It could also look to go more niche – not unseating Samsung, but instead succeeding on its own, more limited terms.

“Compare phones to autos. When Porsche has a great year the folks over at GM and Mercedes aren’t worried. There’s room for everybody,” said one person familiar with the group.

That is the view Mr Chou shares.

“The market is really big. HTC is a small company. For us to stay competitive and survive is not a huge problem,” says Mr Chou. HTC stands a “good chance” of winning a 15 per cent share in high-end smartphones and 5 per cent of the global market overall would be a “pretty good number for us”, he adds.

“People need to look at it that way, rather than [saying] we have to beat the other guy who has a 50 per cent market share.”

Oct 21, 2013

HTC Chairwoman Takes More Active Management Role

EVA DOU

The ground is shifting at HTC Corp.2498.TW +0.38%

The Taiwanese smartphone maker’s Chief Executive Peter Chou is now temporarily focusing on product development and innovation, while Chairwoman Cher Wang has begun overseeing some areas like marketing, sales and supplier relationships, the Financial Times reported.

Ms. Wang had previously been less hands-on with HTC’s daily operations, but has in recent weeks become an almost daily presence alongside Mr. Chou at the company’s high-level meetings, people familiar with the matter told The Wall Street Journal.

The move raises the question of whether Mr. Chou is being sidelined. Some stockholders have called for his removal amid the company’s slide, although he told The Wall Street Journal in June he had no plans to quit.

The news of Ms. Wang’s greater involvement comes shortly after HTC announced its first quarterly net loss since it went public in 2002. Mr. Chou has borne the brunt of the blame for missteps in the company’s marketing and product strategy that have weighed on its share price.

Despite the criticisms, Mr. Chou is widely lauded inside and outside the company for his technical and design abilities. He is now focusing his energies on this area.

“I took on too many things,” he said in an interview with the Financial Times. “I need to be more focused on innovation and [the] product portfolio.”

Ms. Wang is now working six days a week at HTC, compared with two days a week previously, the Financial Times reported. A company spokeswoman didn’t immediately respond to requests for confirmation of the report.

The company’s stock is down 1.1% at 131.50 New Taiwan dollars (US$4.50) so far in Monday trading. Fund managers said the management shift doesn’t fundamentally change the game for the beleaguered smartphone maker.

“The Chairwoman could work eight days a week and investors wouldn’t necessarily care,” said Hua Nan Securities Investment Management Assistant Vice President Henry Miao. “HTC is still facing difficulties competing against low-end smartphone makers in China, as well as difficulty holding its ground against Apple and Samsung on the high end.”